My current proyect is a new version of my company computer platform, the previous one was made using a template engine of their own that basically as a variable replacer, no hierarchical rendering, no conditional fetching, none of the features that make smarty great. The newer one uses smarty at it's fulles -except for caching, that is not yet used-, and certain parts even build smarty templates on the fly. Currently it has all the same features of the previous one and many aditions so I decided to make a speed benchmark.

Rendering 1000 pages

Old version average time 3.4 secs
Old version maximun time 8 secs
Old version minimun time 1.2 secs

New version Average time 0.36 secs
New version maximun time 0.69 secs
New version minimun time 0.17 secs

Some other differences: Old version templates were stored on disk & database, new one version just uses a database, old version access was native mysql functions, new one uses adodb without any cache or speed up.

No source code from the previous version was incorporated into the new one, it is a full rewrite without any look at previous code.

I have used Smarty in a lot of large scale projects, I am not feeling it to become slower.

But it has sometimes, issues with proper management:
* While overwriting template files, some FTP clients do to update the template timestamp of the existing template files. This makes a problem with deleting the complied files. The compiled files can not be properly recreated when you run the application.
*Since the compiled files may be owned by a different user/group, normall the apache or www, deletion is not possible. Hence, either I have to use an online file manager in the available control panel, or use root-account ssh connection for the fix if available.
* Since there are very few resources working with Smarty, it is harder for finding a proper guy to handover the complete source files who can take care of all the aspects of Smarty and relaled project files.

Seriously, since you are running your website on a linux machine, you should not worry about performance issues blaming Smarty. Revise your own application codes, database queries and other things too, if possible.